Despite the Centre’s upbeat mood and efforts to talk up the sentiment, India Inc’s performance in the second quarter is expected to disappoint yet again. For the July-September quarter, sales and net profit of listed companies are set to decline on a year-on-year basis, indicating that broader economic conditions remain weak.

Kotak Institutional Equities expects the net profit of 30 companies forming part of the S&P BSE Sensex to decline 2.8 per cent year-on-year in the September quarter on a 5.2 per cent decrease in net sales. ICICI Direct said that the aggregate profit after tax of Sensex companies is likely to decline 3.1 per cent.

“The subdued performance of Tata Motors coupled with the muted performance of oil and gas and metals companies is expected to result in PAT de-growth (contraction) of aggregate Sensex companies,” ICICI Direct said in a research report.

Mirroring the previous three quarters, the market is expecting another tepid earnings season, said Bank of America-Merrill Lynch (BofA-ML) in a report.

“Sensex profit growth is expected to be a mere 2 per cent on a consolidated basis. Excluding financials, aggregate profit is expected to fall by 3.7 per cent,” the report said. Also, sales of Sensex firms are expected to contract for the fourth consecutive quarter at -9.1 per cent year-on-year — a first-ever occurrence — it said.

Though India’s gross domestic product in the June quarter grew 7 per cent against 7.5 per cent in the March quarter, the International Monetary Fund has cut its 2015 GDP growth forecast from 7.5 per cent to 7.3 per cent.

The Services Purchasing Managers’ Index (PMI) in September eased to 51.3 from 51.8 in August, while the manufacturing PMI dropped to a seven-month low of 51.2 from 52.3.

However, some sectors, including pharmaceuticals, IT and banking, are expected to surprise positively with double-digit growth in net profit year on year and a substantial increase on a sequential basis.

Better days ahead

Analysts said that after a disappointing two years, India Inc could see better days from the December quarter. The 50-basis-point cut in the policy rate by the RBI, the strengthening of the rupee following the deferment of rate hikes by the US Fed and lower commodity prices are expected to benefit corporates.

“We believe India Inc is well placed to reap the benefits of lower commodity prices … going into the second half of FY16. Additionally, the recent 50 bps repo rate cut is likely to aid the revival of the stagnant capex cycle,” said Pankaj Pandey, head of research at ICICI Direct.

The earnings season is expected to start with Infosys’ results on October 12.

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